Update on RBNZ, CBDCs and the money paid to global management consultancy Accenture.
Imagine if our researchers in public law and government studies were paid $600k to review and assess the risks when CBDCs are toggled to digital IDs...
Key points:
No report yet from the RBNZ July 2024 Consultation.
Use of ‘digital cash’ instead of ‘CBDC’ by the RBNZ is confusing and misleading to the New Zealand public. This language departs from global norms.
The difference between CBDCs and conventional digital currency involves the programmability or smart contract and composability functions.
Accenture have collaborated with the large global institutions who would gain financially and politically from the adoption of CBDCs.
Risks considered by the RBNZ and Accenture do not include democratic risks and the risks from the greater taking of powers by the RBNZ.
The RBNZ’s Annual Report seems to infer that the RBNZ may believe that the consultations with the public are more about informing the public than learning what the public have to say, and taking public concerns about risk seriously.
Academics and legacy media seem unwilling to engage on the democracy-related issues PSGR are highlighting.
PSGR repeatedly draw attention to the lack of independent funding for academia and research, who could review and assess risk at arms length from the institutions with the political and financial conflicts of interest.
To date, key technical adviser to the RNBZ, billion dollar company Accenture have been paid $604,810 to consult on RBNZ’s CBDC campaign.
As of November 2024, the people of New Zealand continue to wait for the Reserve Bank of New Zealand (RBNZ) to publish its findings, following a general consultation on ‘digital cash’ which closed on July 26, 2024.
We are concerned that the RBNZ are downplaying risk-based issues. In PSGR’s Consultation response paper we stated that:
The RBNZ have downplayed technical aspects which amplify the power of these technologies (which traverse ledger technologies, application programming interfaces, smart contracts, CBDCs and Digital IDs) in the consultation documents and completely ignored them in the survey and written response questions.
After this consultation ended, the RBNZ completed a focused consultation with disabled people, their whānau and support persons. This consultation closed on 30 September 2024. A report on this consultation is yet to be published.
PSGR’s discussion paper, Stepping Back from the Brink: The Programmable Ledger. Four democratic risks that arise when Digital IDs are coupled to Central Bank Digital Currencies explores the history and actors who have globally worked to drive both the informational environment and the development of digital identity systems and central bank digital currencies and considers the conflicts of interests (political and financial) that interact across and between these global institutions. These actors are powerful global institutions, and include central banks, global banks, the finance and technology (fintech) industry and management consultancy firms.
PSGR’s discussion paper reviews the Reserve Bank of New Zealand's (RBNZ) recent shifts to expand regulation and power, and questions what the broader impacts might be, should the RBNZ secure the power to release CBDCs.
The Stepping Back from the Brink paper queries the extent to which members of Parliament are informed about the wider democratic and constitutional issues that are at stake. We have tried to draw attention to the absence of any independent research, discussion or debate looking at the bigger picture, from academic experts, including experts in governance and constitutional law.
The RBNZ already have extensive responsibilities, which are already more extensive than most Central banks. Might there be conflicts of interest if they can also issue retail CBDCs?
FOUR DEMOCRATIC RISKS
This is why PSGR concluded that there are four democratic risks that arise -
Digital IDs will necessarily be coupled to central bank digital currencies (CBDCs) enhancing all-of-government oversight over private activity.
CBDCs will be transferred electronically using pre-programmable smart contracts. Smart contracts are executable code. They can be deployed remotely or directly on Central bank ledgers. Three-party locks can be programmed whereby a third party can issue directions. Smart contracts can incentivise/disincentivise behaviour.
The potential for erosion of parliamentary oversight. The Reserve Bank of New Zealand (RBNZ), is, of course, accountable to our sovereign democratic government. Conventional money creation through the budgetary (appropriations) process arises through processes of negotiation between Ministers, department heads and their staff and public lobbying. Reserve bank power to create or release CBDCs would be at arm’s length from these processes and remain largely confidential or secret in nature.
Continued increase in oversight and delegation of the production of strategy, policy and rules to the International Monetary Fund (IMF) and the Bank of International Settlements (BIS).
NB: The RBNZ maintain that conventional cash will continue to be issued, and this is understood by PSGR. The key issue revolve around concerns that the RBNZ would gain substantial powers - financial and political, and that this might not be politically appropriate nor good for democracy. RBNZ powers would be at arms length from parliamentary power, RBNZ will receive mentoring and guidance from the Bank of International Settlements and other global institutions which have the potential to displace democratic concerns. Much of the work will also be black-boxed by technical infrastructure and commercial in confidence agreements.
MISLEADING - USING A GENERIC TERM ‘DIGITAL CASH’
Throughout their consultations the RBNZ referred to central bank digital currency as ‘digital cash’. The RBNZ do not differentiate between cash in private bank accounts, which is digital cash, and government benefits which is also paid into people’s bank accounts, which is also digital cash.
It is easy for the public to conflate ‘digital cash’ as similar to the cash used in their bank account when it is fundamentally different, because it will be programmable. The programmability is envisaged by management consultancy Accenture in their RBNZ Strategic Insights Design Dossier (2024) to result in broad ‘societal benefits’ (page 16):
CBDC would accelerate the transition to a digital economy, while accelerating financial inclusion. Smart contracts can be written to enable new functionality and spur innovation. Authorised entities could also programme capabilities into the money itself.
While the programmability functions and any intended risk was not emphasised in the public consultations, programmability is an important feature of CBDCs, Accenture state (page 47):
Globally, programmable payments enabled by the smart contract feature of CBDCs are seen as a key differentiator for CBDCs over the existing payments systems.
The RBNZ use the term ‘digital cash’ which is not the term used, for example, by the Bank of International Settlements. The RBNZs practice is not only misleading because it ‘digital cash’ a generic term which infers similarity to digital cash in commercial bank accounts, the practice hampers people conducting searches either on search engines, and on information and media websites, because it is term that search engines cannot distinguish (in comparison to ‘CBDCs’).
PSGR discuss these ‘other’ forms of digital cash in chapter 9 of our discussion paper.
WERE THE CONSULTATIONS DESIGNED FOR FEEDBACK, OR NOT?
In September 2024 the RBNZ published its 2023/2024 Annual Report. The report provides an indication of the extent to which the RBNZ is prepared to listen to the people of New Zealand and make decisions about whether or not to pursue a CBDC.
As PSGR expressed in our discussion paper (page 34), we are concerned that the RBNZ view CBDCs as a policy that will be carried out. We are concerned that Parliament and the opinion of the people of New Zealand are of little consequence in the overall picture, but may only make recommendations to ‘tweak’ a final predetermined outcome.
New Zealand’s Central bank, working with Accenture have appeared to predetermine that CBDCs will happen, and it seems as if members of Parliament are being entirely bypassed, and that the Minister of Finance is simply a witness.
The RBNZ’s Annual Report suggests that the predetermined position that the RBNZ should have power to digital cash is held by the RBNZ. This indicates that the RBNZ believe that this is a RBNZ decision, not a parliamentary decision, or a decision that should come from a general referendum. At the same time, the RBNZ are cooperating collegially with the fintech industry, who would active technical roles in a future CBDC infrastructures, including in the design of smart contracts and ledger platforms.
The RBNZ note (page 5):
We published our consultation paper on Digital Cash, a type of central bank digital currency. Digital Cash will help enable a money and payments system that is innovative, competitive and contributes to the development of New Zealand’s digital economy.
The RBNZ refer to ‘public engagement’ which ‘familarises the public’ (page 25):
The public’s need for central bank money may not be limited to physical cash. Therefore, our research, design, and stakeholder engagement exploring a Central Bank Digital Currency (CBDC), or ‘Digital Cash’, for New Zealand has continued. A public consultation released in April 2024 has been accompanied by an extensive public engagement programme and achieved extensive media coverage. The consultation seeks to familiarise the public with our work and to identify areas for further research. This analysis will inform our decision to progress with ‘Digital Cash’ for New Zealand. Submissions to the consultation closed in July 2024.
At the same time the RBNZ are collegially collaborating with the fintech sector - where they clearly talk about CBDCs (page 44):
Competition, innovation and efficiency
− Collaboration in the payments sector to promote innovation, working together to bring open banking to New Zealand, working on a CBDC (the Digital Cash initiative), supporting the emerging fintech sector to navigate our country’s regulatory requirements, and sharpening the consumer credit regime and the conduct of financial institutions;
While their RBNZ’s Performance Assessment of the progress of SPE12 (page 98) which aims to:
‘explore the future of money and payments to ensure they are reliable, efficient and support innovation and inclusion.’
Suggests a prescriptive (quasi-authoritarian) position when it comes to public interactions:
Performance assessment We have made significant progress in our work to explore the future of money and payments. Compared to the preceding year, we have a much greater understanding of our preferred design of “digital cash” and the areas where further work is required, we have a strategy for taking forward our private innovation monitoring work and have advanced work with CoFR agencies on delivering on COFR’s Payments Vision. A key focus in this period has been to provide greater visibility and clarity to the public on the possible future of digital cash in New Zealand. We launched public consultation, with engagement alongside that. In doing so, we have received thousands of submissions, have run two public webinars, a number of workshops with stakeholder groups and have had extensive media coverage. This work is building public awareness of our work on digital cash, as well as our own understanding of public opinion and technical and design issues to further consider. Consultation is the culmination of work over the past two years. To date, the engagement has been excellent, setting us up well for the next steps in this work programme. Early in this period we also completed an engagement with Accenture to better understand the value proposition for digital cash in New Zealand.
As we reiterate, the RBNZ state in their Annual Report that:
A key focus in this period has been to provide greater visibility and clarity to the public on the possible future of digital cash in New Zealand’ … and that the RBNZ are ‘building public awareness of our work on digital cash, as well as our own understanding of public opinion and technical and design issues to further consider’.
The language of RBNZ infer that the RBNZ are not so much looking for information from the public on the acceptability of CBDCs, but that the consultation process is merely about building public awareness. It reveals that they’re happy to talk about CBDCs when they discuss the fintech industry, but when they talk with the public it is about ‘digital cash’.
ACCENTURE - MAXIMISING BENEFITS LOCALLY & GLOBALLY - BUT FOR WHOM?
The engagement with Accenture is ‘to better understand the value proposition for digital cash in New Zealand’.
Accenture were paid $121,157 in 2022/23 and $483,653 and 2023/34 for their work.
As PSGR discuss in the Introduction to our discussion paper, at roughly the same time Accenture has been working with the RBNZ, Accenture has been collaborating with KPMG, PwC and the World Economic Forum, releasing the report: Earning Digital Trust: Decision-Making for Trustworthy Technologies.
In chapter 2 of PSGR’s discussion paper (pages 23-24) we take a look at Accenture’s power and reach:
‘Professional services company’ Accenture are the RBNZ’s ‘key technical adviser. Accenture is a Fortune Global 500 Company with a multibillion dollar income (revenue F/Y 2023 USD64 billion). Accenture’s primary income comes from ‘enhancing commercial competitiveness’. Accenture’s key ‘partners’ include: Adobe, Alibaba, Amazon Web Services, Blue Yonder, Cisco, Databricks, Dell, Google, HPE, IBM RedHat, Microsoft, Oracle, Pegasystems, Salesforce, SAP, ServiceNow, Snowflake, VMware, Workday and many others.’ 62 Shareholders received 16% compound annual total return over the past 5 fiscal years.
Accenture is actively engaged on CBDC and Digital ID projects globally but it is very evident that issues of constitutional and administrative law and the public interest, remain outside the companies purview.64 Accenture staff (Alumni) move in and out of the public and private sector, and staff have collegial relations with staff globally.
In chapter 7 PSGR reveals how Accenture has led the global push for digital identity systems for roughly a decade, and during this time has collaborated with the World Bank and global banks, the fintech and management consultancy sectors to develop and refine policy on digital ID systems.
As the discussion paper demonstrates, much of the language used by Accenture, fintech and the global banks, which problematise and frame how risk is, and is not considered, was replicated in the Strategic Design Insights Dossier which Accenture authored for the RBNZ.
PSGR would prefer that independent experts problematise on how risk is considered, and is not considered.
MISSING. WHERE ARE EXPERTS IN GOVERNMENT & PUBLIC LAW?
This 2-page PDF briefly outlines PSGR’s Four Democratic risks (discussed above) and our recommendations:
PSGR are mindful that perhaps our concerns, and our recommendations are wrong?
PSGR have attempted to engage with academic researchers with expertise in government and policy, and constitutional law to discuss our concerns and recommendations, but no experts in democracy and governance have responded to our attempts to contact them.
New Zealand legacy media have not reached out to PSGR for an interview (which we would gratefully accept).
You can help by sharing this information - including with friends, family, critics, democracy and constitutional law nerds and technology geeks!
Interviews with author Jodie Bruning can be accessed here and here and here. To request an interview, please email: info@PSGR.org.nz
